EUR/USD – Euro Edges Lower, Markets Eye Key US Job Numbers

EUR/USD is showing little movement on Thursday, as the pair continues to have an uneventful week. Currently, the pair is trading at the 1.12 line. On the release front, German Factory Orders was unexpectedly strong, posting a gain of 1.0%. This easily beat the forecast of 0.3%. Eurozone Retail PMI dipped to 49.6 in September, down from 51.0 a month earlier. In the US, today’s highlight is Unemployment Claims, with the indicator expected to remain steady at 255 thousand. Unemployment Claims continues to impress, posting readings below the estimate for nine consecutive weeks. Will this streak continue in the upcoming release?

US September job numbers will be in the spotlight on Friday, with the release of three key indicators. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge up to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against the euro.

Is the Eurozone banking sector in trouble? According to recent reports, giant Deutsche Bank, one of the largest banks in Europe is facing financial difficulties and may have to be bailed out by the German taxpayer. The bank has been hit with a staggering $14 billion fine from the US Justice Department over mortgage securities irregularities, and its shares have plunged over 50% since July 2015. Although the German promptly government denied the bailout claim, Deutche’s problems have put the spotlight on the banking sector, which has seen profits drop due to the ECB’s ultra-low interest stance. This week, Citi released a report that found that European banks are among the worst performing over the past decade compared to other global regions. With the Eurozone bracing for further fallout from Brexit once negotiations commence between Britain and the EU, further signs of instability in the banking sector could weigh on the euro.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

EUR/USD Fundamentals

Thursday (October 6)

• 6:00 German Factory Orders. Estimate 0.3%. Actual 1.0%
• 8:10 Eurozone Retail PMI. Actual 49.6
• Tentative – French 10-year Bond Auction
• 8:47 Spanish 10-year Bond Auction. Actual 1.07%
• 8:58 French 10-year Bond Auction. Actual 0.28%
• 11:30 ECB Monetary Policy Meeting Accounts
• 11:30 US Challenger Job Cuts
• 12:30 US Unemployment Claims. Estimate 255K
• 14:30 US Natural Gas Storage. Estimate 67B

Upcoming Key Events 

Friday (October 7)

• 12:30 US Average Hourly Earnings. Estimate 0.2%
• 12:30 US Nonfarm Employment Change. Estimate 171K
• 12:30 US Unemployment Rate. Estimate 4.9%

*All release times are EDT

* Key events are in bold

EUR/USD for Thursday, October 6, 2016

EUR/USD October 6 at 9:45 GMT

Open: 1.1206 High: 1.1210 Low: 1.1189 Close: 1.1181

EUR/USD Technical

• EUR/USD has posted small losses in the Asian and European sessions
• 1.1150 is providing support
• There is resistance at 1.1278

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.1278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement on Thursday, consistent with the lack of movement from EUR/USD. Short positions have a majority (58%), indicative of trader bias towards EUR/USD continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.